1. Consumer Price Index (CPI)

2. CPI
Measure of the average rate of price change for a fixed group of goods and services bought by Canadian consumers.
Measures inflation

3. Calculating CPI
Obtained by comparing, through time, the cost of a fixed basket of commodities purchased by Canadian consumers in a particular year
CPI has a base year that everything gets compared to

4. CPI Let’s set our base year in 2000
Our basket of goods has 1 loaf of bread
This loaf of bread costs $1.00 in The index value is 100.
In 2001, the bread is now $ Now, the price index is 125.
In 2002, the bread now costs $1.31. Now our price index in is 131.

5. Year – Price Index Value
2000 – 100
2001 – 125
2002 – 131
2003 – 133

6. Calculate Inflation Between 2003 & 2004
(P2 – P1)/P1 x 100
( )/ 133 x 100 = 3%
CPI this year – CPI last year x 100
CPI last year

7. Another example:
Using inflation to calculate consumer price index

8. Calculate the price index
If index for January was (1990 = 100)
Inflation between Jan 2000 and Feb 2000 is 2.1%
Then February index will be:
119.8 x = 122.3

9. CPI Exercise
Year CPI

10. CPI Exercise A family of four had an income of 18 500 in 1985
a) approximately what income would they need in 1995 to have the same standard of living

11. CPI Exercise A)
( )/75.0 x 100 = 38.93% = inflation between 1985 and 1995
Prices in 1995 = x =

12. Another way to get the same answer
CPI
Income
1985 75
18500
1995
104.2 ?
Use of cross multiplication: = ?
104.2 x ÷75 =
Due to rounding issues, the answers are slightly different. However, both method/answers are acceptable.

13. http://www.rateinflation.com/inflat ion-rate/canada-inflation-rate